Why the ‘Set-Aside’ Strategy That Worked in 2023 Won’t Cut It in FY 2025

If your small business landed contracts in 2023 by chasing easy set-asides, here’s a wake-up call for FY 2025: that playbook is expired. What used to be a reliable strategy, waiting for a small-business set-aside in your contractor NAICS code and jumping on it, isn’t going to yield the same results this year. The rules have changed, agency behavior has shifted, and federal procurement is evolving in ways that demand a new approach. Let’s break down what’s changed, why it matters, and what smart businesses should be doing now.

In 2023, small businesses had the wind at their backs. Agencies were aggressively pursuing lofty goals: 28.4% of contract dollars went to small businesses, including 12.1% to small disadvantaged businesses (SDBs, such as 8(a) firms), 5.1% to SDVOSBs, and 4.9% to women-owned small businesses. The SBA’s Scorecard was lit up with “A” grades, and most agencies were falling over themselves to meet or exceed their targets. That meant lots of 8(a)-only, SDVOSB-only, and even some WOSB set-asides, often with streamlined competition or even direct awards. If you had the right certifications, the barrier to entry was low, and the win rate was high.

Fast forward to FY 2025 and everything looks different.

The SDB goal has dropped back to its statutory 5% after years of being pushed to 11–12%. Agencies that were scrambling to meet those higher benchmarks in 2023 can now hit the lower target without much effort. That means less incentive to create new 8(a)-only solicitations or sole-source awards. Meanwhile, Congress raised the SDVOSB goal to 5%, and agencies are now giving equal weight to WOSB and HUBZone goals that have historically lagged behind. Translation: contracting officers aren’t just chasing small business numbers anymore, they’re trying to close specific category gaps. And they’re more strategic about it.

Also in play: the rise of category management and contract consolidation. Agencies are under pressure to use existing GWACs, IDIQs, and Best-in-Class vehicles instead of issuing new open-market RFPs. So what used to be an 8(a)-only RFP on SAM.gov might now be a task order on STARS III or OASIS+. If you’re not already on these vehicles, or don’t have a partner who is, you’re not even in the room, let alone in the game.

The result? Fewer small-business set-asides hitting the open market. More competition for every one that does. And more evaluation criteria that go beyond size: past performance, cybersecurity compliance, ISO certifications, supply chain risk plans, even climate goals. In 2025, simply being eligible isn’t enough, you need to be the lowest-risk, best-qualified, fastest-to-deploy choice. Agencies are juggling competing demands and want reliable vendors who can help them check multiple boxes.

Here’s what you should be doing instead:

1. Get certified, but strategically. If you’ve been meaning to pursue women business certification, disabled veteran small business certification, or 8a certification assistance, now is the time. Agencies are actively trying to meet WOSB and HUBZone goals they’ve historically missed. Being in one of those categories, especially if your target agency missed its goal in 2023, gives you a better shot. But don’t stop there. Make sure your contractor NAICS code is aligned to one of the “best NAICS codes for small business” based on current federal spending trends. Your NAICS code can make or break your visibility.

2. Get on contract vehicles. Think of GSA Schedules, 8(a) STARS III, Polaris, or OASIS+ as your backstage pass. Agencies are increasingly fulfilling needs via these pre-competed contracts. If you’re not on one (or subcontracting with someone who is), you’re locked out. If you need help navigating the government contracting certification process or applying for a vehicle, now’s the time to engage sba 8a certification services or teaming consultants.

3. Focus your BD around agency pain points. Look at the SBA scorecard data. See which agencies missed which goals, especially in WOSB, HUBZone, or SDVOSB. Build a mini capture strategy that shows how you can help them fill the gap. If you don’t have the certification yourself, partner with someone who does. Joint ventures through the SBA Mentor-Protégé program are a powerful tool here.

4. Boost your qualifications. Government Contract Proposal Writing isn’t just about responding to an RFP anymore. In 2025, your proposals need to showcase past performance, compliance credentials (like CMMC), and technical expertise. Consider investing in certifications or partnering with firms that have what you lack. Also, keep your capability statement and SAM.gov profile updated, especially your NAICS codes for government contractors.

5. Don’t overlook subcontracting. With so many large primes needing to meet small-business goals on big vehicles, there’s more room than ever for subcontractors. Align yourself with primes who have upcoming task orders in your domain. It may not be glamorous, but it keeps you billable and builds past performance. If you’re looking for an entry point into SBIR Grant Assistance or 8a contracts services, this can be a foot in the door.

Bottom line: FY 2025 still holds plenty of government contracting opportunities, but they’re not where they used to be. Agencies aren’t just checking a “small business” box anymore. They’re targeting specific goals, using pre-competed vehicles, and picking vendors who lower their risk while helping them meet multiple mandates. The good news? If you can adapt your strategy, there’s still a seat at the table.

For a deeper dive into how to reposition your company when set-asides dry up, check out our related blog post: Which Federal Set-Aside Program Is Right for You? Here’s the Clear, No-Nonsense Breakdown on the Squared Compass blog.

If you aren't a Squared Compass partner, what are you waiting for? From getting your business set up with specific government set aside programs at both the State and Federal level, to being empowered by a Fractional Capture team to win government contracts, to receiving tailored government contract opportunities Squared Compass delivers immense value which helps propel our partners to success. Schedule a chat withour team today.